Hospital Prospective Payment System Research Articles

The effects of the COVID-19 pandemic on urban and rural hospital profitability.

There are long-standing differences in profitability between rural and urban hospitals. Prior to the COVID-19 Public Health Emergency (PHE), rural hospital profitability was decreasing, while urban hospital profitability was increasing. During the PHE, the Federal Government provided billions of dollars of support to hospitals. Given the prepandemic differences in trends in profitability, it is likely that the PHE funding had different effects on rural hospitals and urban hospitals. This study uses 2015-2023 Medicare cost report data from acute-care hospitals to assess the impact of COVID-19 PHE funding on hospital profitability. We employ descriptive Kruskal-Wallis and chi-square tests and an interrupted time series analysis to evaluate the effect of PHE funding on operating margins for a stratified sample of rural prospective payment system (PPS), urban PPS, and critical access hospitals (CAHs). We found that the PHE funding was associated with significant increases in operating margins, with rural PPS hospitals experiencing similar increases compared to urban PPS hospitals, and CAHs surpassing both rural and urban PPS hospitals in their margin values. However, if PHE funding had not been provided, our evidence suggests operating margins for all hospitals in 2022-2023 would have been below prepandemic levels. This preliminary analysis portrays the importance of the PHE government funding in supporting hospitals during the pandemic, and shows declining profitability trends without the funds. Rural PPS hospitals fare the worst suggesting continued need for financial support if the trend continues.

Legislating Nurse Staffing: Projected Impact on Hospital Economics, Process Flow, and Hospital-Associated Infections in Montana.

The aim of this study was to project the impact of legislated nurse staffing ratios on patient-, staff-, and system-level outcomes for Prospective Payment System (PPS) hospitals in Montana. In 2023, House Bill 568 was introduced in Montana focused on legislating hospital safe nursing standards. A quantitative design was used for a convenience sample of Montana PPS hospitals. Data were gathered through a newly developed survey and from other publicly available sources for the years 2018 to 2022. Independent t tests were conducted when appropriate with the significance threshold set at 0.05. Projections indicate no significant change in patient outcome metrics accompanied by increases in labor requirements, slower emergency department throughput times, and decreases in hospital operating margins. In Montana, legislating nurse staffing ratios would have downstream implications inconsistent with the intended impact on patient safety, emphasizing the complexity of variables within and external to the healthcare system that drive patient-, staff-, and system-level outcomes.

Early impacts of the Pennsylvania Rural Health Model on potentially avoidable utilization.

The Pennsylvania Rural Health Model (PARHM) is a novel alternative payment model for rural hospitals that aims to test whether hospital-based global budgets, coupled with delivery transformation plans, improve the quality of health care and health outcomes in rural communities. Eighteen hospitals joined PARHM in 3 cohorts between 2019 and 2021. This study assessed PARHM's impact on changes in potentially avoidable utilization (PAU)-a measure of admission rates policymakers explicitly targeted for improvement in PARHM. Using a difference-in-differences analysis and all-payer hospital discharge data for Pennsylvania hospitals from 2016 through 2022, we found no significant overall reduction in community-level PAU rates up to 4 years post-PARHM implementation, relative to changes in rural Pennsylvania communities whose hospitals did not join PARHM. However, heterogeneous treatment effects were observed across cohorts that joined PARHM in different years, and between critical access vs prospective payment system hospitals. These findings offer insight into how alternative payment models in rural health care settings may have heterogeneous impacts based on contextual factors and highlight the importance of accounting for these factors in proposed expansions of alternative payment models for rural health systems.

Hip and Knee Arthroplasty Alternative Payment Model Successes and Challenges.

Hip and Knee Arthroplasty Alternative Payment Model Successes and Challenges.

Trends in Cancer Treatment Service Availability Across Critical Access Hospitals and Prospective Payment System Hospitals.

Rural residents experience worse cancer prognosis and access to cancer care providers than their urban counterparts. Critical access hospitals (CAHs) represent over half of all rural community hospitals. However, research on cancer services provided within CAHs is limited. The objective of this study was to investigate trends in cancer services availability in urban and rural Prospective Payment System (PPS) hospitals and CAHs. Retrospective, time-series analysis using data from 2008 to 2017 American Hospital Association Annual Surveys. Multivariable logistic regressions were used to examine differential trends in cancer services between urban PPS, rural PPS, and CAHs, overall and among small (<25 beds) hospitals. All US acute care and cancer hospitals (4752 in 2008 to 4722 in 2017). Primary outcomes include whether a hospital provided comprehensive oncology services, chemotherapy, and radiation therapy each year. In 2008, CAHs were less likely to provide all cancer services, especially chemotherapy (30.4%) and radiation therapy (2.9%), compared with urban (64.4% and 43.8%, respectively) and rural PPS hospitals (42.0% and 23.3%, respectively). During 2008-2017, compared with similarly sized PPS hospitals, CAHs were more likely to provide oncology services and chemotherapy, but with decreasing trends. Radiation therapy availability between small PPS hospitals and CAHs did not differ. Compared with all PPS hospitals, CAHs offered fewer cancer treatment services and experienced a decline in service capability over time. These differences in chemotherapy services were mainly driven by hospital size, as small urban and rural PPS hospitals had lower rates of chemotherapy than CAHs. Still, the lower rates of radiotherapy in CAHs highlight disproportionate challenges facing CAHs for some specialty services.

The association between hospital care transition planning and timely primary care follow-up.

To determine whether Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Care Transitions (CTM-3) Scores were associated with timely (14-day) primary care provider (PCP) follow-up visits, and to look for disparities across various types of urban and rural hospitals. Data were obtained for 3,299 hospitals: 2,000 urban, 544 micropolitan prospective payment system (PPS), 109 micropolitan critical access hospital (CAH), 252 noncore rural PPS, and 394 noncore rural CAH. HCAPPS data were drawn from CMS Hospital Compare (2015). The dependent variable, 14-day PCP follow-up rate for each hospital, was drawn from the 2015 Dartmouth Atlas. In analysis adjusting only for hospital characteristics, higher CTM-3 scores were positively associated with PCP follow-up; however, the relationship was no longer significant after controlling for area-level (contextual) measures, such as percent minority population, percent unemployed, and percent uninsured. In the fully adjusted model, rates of PCP follow-up were significantly higher for micropolitan PPS, noncore PPS, and noncore CAH hospitals than for urban hospitals. In fully adjusted analysis, the lack of significance between CTM-3 scores and PCP follow-up suggests that community characteristics facilitate or impede timely PCP follow-up to an extent that may overshadow in-hospital efforts. Disparities between CAHs and rural PPS hospitals may be due to differing enrollments in quality incentive plans; future research is needed to address this issue. Compounding this issue, the strong negative relationship between percent Medicaid reimbursement (payor mix) and PCP follow-up suggests possible disparities for safety net hospitals.

Diagnosis-Related Group (DRG)-Based Prospective Hospital Payment System can be well adopted for Acute Care Surgery: Taiwanese Experience with Acute Cholecystitis.

Laparoscopic cholecystectomy (LC) is a common procedure for cholelithiasis paid by diagnostic-related groups (DRGs) systems. However, acute cholecystitis (AC) patients usually have heterogeneous conditions that compromise the successful implementation of DRGs. We evaluated the quality/efficiency of treating AC patients under the DRG system in Taiwan. All AC patients who underwent LC between October 2015 and December 2016 were included. Patient demographics, treatment outcomes, and financial results were analyzed. Patients were reimbursed by one of the two DRG schemes based on their comorbidities/complications (CC): DRG-1, LC without CC; and DRG-2, LC with CC. Hospitals were reimbursed the costs incurred if they were below the lower threshold (balanced sector); with the outlier threshold if costs were between the lower and outlier thresholds (profitable sector); and with the outlier threshold plus 80% of the exceeding cost if costs were higher than the outlier threshold (profit-losing sector). Among 246 patients, 114 were paid by DRG-1, and 132 were by DRG-2. In total, 195 of 246 patients underwent LC within 1 day after admission, and patients with mild AC had shorter hospital stays than those with moderate or severe AC. The complication rate was 7.3% with only one mortality. In total, 92.1% of patients in DRG-1 and 90.9% of patients in DRG-2 were profitable. The average margin per patient was 11,032 TWD for DRG-1 and 24,993 TWD for DRG-2. DRGs can be well adopted for acute care surgery, and hospitals can still provide satisfactory services without losing profit.

The First Retrospective Commercial Claims-Based Analysis of CAR T Treated Patients with Relapsed or Refractory Large B-Cell Lymphoma (R/R LBCL)

Introduction: Approximately 74,000 Americans are diagnosed with Non-Hodgkin Lymphoma (NHL) each year, of whom 30% are identified as having LBCL. In recent years, two autologous anti-CD19 chimeric antigen receptor T-Cell (CAR T) therapies were approved for the treatment of patients with R/R LBCL with ≥ 2 prior systemic therapies. Objectives: To describe the demographic and clinical characteristics of the CAR T patients and to compare healthcare resource utilization (HCRU) and costs pre- and post-CAR T therapy. Methods: This pre/post-index comparison evaluated in the Optum Research Database included adult (age ≥ 18 years) commercial and Medicare Advantage (MA) enrollees, with medical benefits and evidence of medical/procedure codes indicative of CAR T therapy between 01/01/2017 and 03/31/2019. Patients must have been continuously enrolled in their commercial healthcare plan for at least 3 months prior to and 6 months after the infusion (index) unless death occurred. Patients with evidence of pre-index leukemia were excluded. Baseline demographic and clinical characteristics included age, gender, insurance type, geographic region, and comorbidities. Measures of pre/post HCRU and standardized cost (scaled as per patient per month (PPPM) values to account for variable follow-up durations) included ambulatory visits, emergency department (ED) visits, and inpatient admissions (both Intensive Care Unit (ICU) and non-ICU visits). Information on the CAR T administration index visit and length of stay (LOS) for inpatient admissions were also captured. Data analysis (descriptive statistics) was conducted using Statistical Analysis System (SAS) Version 9.4. Results: 109 patients met all inclusion criteria. The patient mean age was 59.31 (SD = 12.60), 59% were male, 70% were commercially insured, 30% MA, and the mean Quan-Charlson Comorbidity score was 3.60.Thirty patients received CAR T administration through clinical trials. Seventeen percent received CAR T therapy in a Prospective Payment System (PPS) Exempt Cancer Hospital and 83% received treatment in Inpatient PPS hospitals. The CAR T therapy index event was administered inpatient for 82% of patients and twenty patients (18%) received CAR T in the outpatient setting. The median LOS during CAR T administration was 16 days which included 52% ICU admissions. During the pre-index period, all patients experienced an ambulatory visit with an average of 15.09 visits PPPM, whereas 41% had an ED encounter for an average rate of 0.39 visits PPPM, and 44% had an inpatient stay with 0.28 PPPM. The total medical and pharmacy costs were $128K PPPM. With a median follow-up of 8.4 months, patients experienced 46% fewer ambulatory visits (average 8.14 PPPM, p-value &amp;lt; 0.001), 49% fewer ED visits (average 0.20 PPPM, p-value &amp;lt; 0.037), and 18% fewer inpatient visit rates (average 0.23 PPPM, p-value = 0.415) in the post index period (excluding the index event) than pre-index period. The mean total medical and pharmacy costs were also 49% lower at $66K PPPM (p-value &amp;lt; 0.008). Conclusions:Post-CAR T care was associated with lower health care utilization including fewer ambulatory visits, and ED visits and lower overall total health care costs compared to pre-CAR T care. Disclosures Purdum: Kite: Current Employment, Current equity holder in publicly-traded company. Johnson:Optum: Current Employment, Current equity holder in publicly-traded company. Bonagura:Optum: Current Employment, Current equity holder in publicly-traded company. Nyamutswa:Kite: Current Employment, Current equity holder in publicly-traded company. Elliott:Optum: Current Employment. Lal:Optum: Current Employment.

CMS Finalizes Plans for Pay Hike, Less Regulation

Regulatory changes impacting post-acute care facilities for fiscal year 2019 are expected to increase reimbursements while reducing bureaucratic burden, according to federal health officials. The Centers for Medicare & Medicaid Services long-term care hospital prospective payment system (LTCH PPS) final rule for fiscal year 2019 will raise overall payments to acute care facilities by 3%, including monies for new technology add-ons and uncompensated care, according to the agency. The standard net payment rates will increase by .09% ($39 million). Skilled nursing facilities will see a 2.4% rise in reimbursements — about $820 million over fiscal year 2018. The threat of the “25% rule” that would have reduced total reimbursements if more than a quarter of a long-term care hospital’s patients came from a single acute-care hospital has also been eliminated by the final rule. Because the changes are budget-neutral, CMS is imposing an annual decrease of about 0.9% to the standard payment rate for LTCHs through 2021. For site-neutral cases, the cut will impact only the standard rate portion of their combined payment. A new “case-mix” model for skilled nursing home facilities will go into effect in October 2019, giving providers time to learn the new ICD-10-based payment system that is tied to what is clinically relevant, rather than to the volume of services provided. The new model also decreases patient assessments documentation requirements, a move that is expected to save facilities approximately $2 billion over 10 years. Other changes include allowing post-admission physician evaluations to count as face-to-face physician visits. The rule takes effect October 1, 2018. For more information, go to https://bit.ly/2vyfr8y Whitney McKnight is a Washington, DC-based health policy freelance writer.

Early Implementation of Malnutrition Clinical Quality Metrics to Identify Institutional Performance Improvement Needs

The Centers for Medicare and Medicaid Services (CMS) is part of the federal government and the largest health care payer in the United States. 1 About CMS. Centers for Medicare and Medicaid Services website. https://www.cms.gov/About-CMS/About-CMS.html. Accessed January 3, 2018. Google Scholar The CMS writes regulations to ensure they only pay for high-quality, safe health care. To better measure quality in the U.S. health care system, the CMS developed electronic clinical quality measures (eCQMs), which became available for voluntary use in 2013. 2 eCQMs. eCQI Resource Center. The Office of the National Coordinator of Health Information Technology, Centers for Medicare and Medicaid Services. https://ecqi.healthit.gov/ecqms. Accessed January 3, 2018. Google Scholar Effective calendar year (CY) 2016, hospitals are required to electronically report clinical quality measures (CQMs) as a part of hospital inpatient quality reporting (IQR) and the electronic health record (EHR) incentive programs (more commonly known as “meaningful use” of the EHR). Hospitals that successfully submit eCQM data will fulfill the Medicare requirements for both programs with one submission. The CMS approves which eCQMs are accepted for any given CY, as well as the minimum number on which a hospital must report. Starting in CY 2017, there were 15 available eCQMs from which to choose, and hospitals were required to report on a minimum of eight. This has changed to four for CY 2018. 3 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the LongTerm Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2018 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Program Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Provider-Based Status of Indian Health Service and Tribal Facilities and Organizations; Costs Reporting and Provider Requirements; Agreement Termination Notices. Fed Regist. 2017; 82 (Updated August 14, 2017. Accessed January 3, 2018): 38001https://www.gpo.gov/fdsys/pkg/FR-2017-08-14/pdf/2017-16434.pdf Google Scholar

DRG system design: A financial risk perspective

A prospective hospital payment system induces a substantial financial risk for the provider that not only increases incentives for cost efficiency. If financial risk is not bounded at an equal level for all DRGs and patient cases, hospitals have incentives to minimize their risk level as well. This paper investigates its consequences and proposes a DRG-System redesign encompassing a fair (or risk-adjusted) compensation. We adjust the price of the provider such that the risk of a financial loss is bounded similar to the Value-at-Risk (VaR). By focusing on the risk-transfer relation we are able to understand the induced basic strategies of risk mitigation for providers: The induced incentives reinforces the objectives in the DRG system to streamline processes in order to control its costs and hence stimulates specialized health clinics, while general providers offering basic services are likely to be more exposed to make losses.

Assessing the Utilization of Total Ankle Replacement in the United States.

Total ankle arthroplasty (TAR) has been shown to be a cost-effective procedure relative to conservative management and ankle arthrodesis. Although its use has grown considerably over the last 2 decades, it is less common than arthrodesis. The purpose of this investigation was to analyze the cost and utilization of TAR across hospitals. Our analytical sample consisted of Medicare claims data from 2011 and 2012 for Inpatient Prospective Payment System hospitals. Outcome variables of interest were the likelihood of a hospital performing TAR, the volume of TAR cases, TAR hospital costs, and hospital profit margins. Data from the 2010 Cost Report and Medicare inpatient claims were utilized to compute average margins for TAR cases and overall hospital margins. TAR cost was calculated based on the all payer cost-to-charge ratio for each hospital in the Cost Report. Nationwide Inpatient Sample data were used to generate descriptive statistics on all TAR patients across payers. Medicare participants accounted for 47.5% of the overall population of TAR patients. Average implant cost was $13 034, accounting for approximately 70% of the total all-payer cost. Approximately, one-third of hospitals were profitable with respect to primary TAR. Profitable hospitals had lower total costs and higher payments leading to a difference in profit of approximately $11 000 from TAR surgeries between profitable and nonprofitable hospitals. No difference was noted with respect to length of stay or number of cases performed between profitable and nonprofitable hospitals. TAR surgeries were more likely to take place in large and major teaching hospitals. Among hospitals performing at least 1 TAR, the margin on TAR cases was positively associated with the total number of TARs performed by a hospital. There is an overall significant financial burden associated with performing TAR with many health systems failing to demonstrate profitability despite its increased utilization. While additional factors such as improved patient outcomes may be driving utilization of TAR, financial barriers may exist that can affect utilization of TAR across health systems. Level III, comparative study.

Assessing the Utilization of Total Ankle Replacement in the US

Category: Ankle Arthritis Introduction/Purpose: While total ankle arthroplasty has been shown to be a cost-effective procedure relative to conservative management and ankle arthrodesis, implant costs and complications have the potential to increase the overall financial burden of performing TAR. The purpose of this investigation is to analyze the overall cost and utilization of total ankle arthroplasty. Methods: Our analytical sample consisted of Inpatient Prospective Payment System hospitals from 2011 and 2012 Medicare claims data and the 2011-2012 Medicare Inpatient Limited Data Sets. Outcome variables of interest were the likelihood of a hospital performing TAR and the volume of TAR cases, conditional on a hospital having performed at least 1 TAR in a year. Data from the 2010 Cost Report and from Medicare inpatient claims were utilized to compute average margins for TAR cases and overall hospital margins. TAR cost was calculated based upon the all payer cost-to-charge ratio for each hospital provided by the Healthcare Cost and Utilization Project. The FY2015 Impact File was used to gather data on hospital-level characteristics, such as bed size, census region, teaching status, and urban/rural location. Hospital ownership data were obtained from the CMS Hospital Compare Database. Nationwide Inpatient Sample (NIS) data was used to generate descriptive statistics on all TAR patients. Results: Medicare participants accounted for 47.5% of the overall population of patients. Orthopaedic specialty hospitals are four times more likely to perform TAR than a non-orthopedic specialty hospital. Average implant cost was $13,034, which accounted for approximately 70% of the total all-payer cost. With respect to teaching versus non-teaching hospitals, the average cost per case is $18,331 and $19,303 respectively. Compared to nonprofitable hospitals, profitable hospitals performing TAR in 2011 had lower total costs ($14,425 vs. $19,884) and higher payments ($19,631 vs. $13,640), leading to a difference in profit of approximately $11,000 from TAR surgeries between profitable and nonprofitable hospitals. Approximately, one-third of hospitals were profitable with respect to TAR. No difference was noted with respect to length of stay or number of cases performed between profitable and nonprofitable hospitals. Conclusion: There is an overall significant financial burden associated with performing total ankle replacement with many health systems failing to demonstrate profitability despite its increased utilization. Profitable hospitals are more likely to have lower cost per day and prosthesis costs and higher payments compared to nonprofitable hospitals. While additional factors such as improved patient outcomes are driving utilization of TAR, financial barriers exist that can affect utilization of TAR across health systems.

Surgical Patient Safety Outcomes in Critical Access Hospitals: How Do They Compare?

The aim of the study was to examine whether Critical Access Hospitals (CAHs), the predominant type of hospital in small and isolated rural areas, perform better than, the same as, or worse than Prospective Payment System (PPS) hospitals on measures of quality. The Healthcare Cost and Utilization Project State Inpatient Databases and American Hospital Association annual survey data were used for analyses. A total of 35,674 discharges from 136 nonfederal general hospitals with fewer than 50 beds were included in the analyses: 14,296 from 100 CAHs and 21,378 from 36 PPS hospitals. Outcome measures included 6 bivariate indicators of adverse events (including complications) of surgical care developed from the Agency for Healthcare Research and Quality's Patient Safety Indicators. Multiple logistic regression models were developed to examine the relationship between hospital adverse events and CAH status. Compared with PPS hospitals, CAHs are significantly less likely to have any observed (unadjusted) adverse event on 4 of the 6 indicators. After adjusting for patient mix and hospital characteristics, CAHs perform better on 3 of the 6 indicators. Accounting for the number of discharges eliminated the differences between CAHs and PPS hospitals in the likelihood of adverse events across all indicators except one. The study suggests there are no differences in surgical patient safety outcomes between CAHs and PPS hospitals of comparable size. This reinforces the central role of CAHs in providing quality surgical care to populations in rural and isolated areas, and underscores the importance of strategies to sustain rural surgery infrastructure.

The DRG-Based Hospital Prospective Payment System in Greece: An Assessment of the Reimbursement Rates Using Clinical Severity Classification

Introduction: Diagnosis Related Groups (DRGs) are used throughout the health care industry to address issues of cost, effectiveness and quality of care. Nonetheless, many have argued that the DRGs do not adequately adjust for patient severity and this prospective payment system leads to reimbursement inequities. Objective: The purpose of this study is first, to explore the relationship between KEN-DRGs reimbursement rates (along with other controls) and clinical severity classification and second, to draw hospital reimbursement policy implications. Methods: The present study is a retrospective observational study, undertaken in a very large number of hospitalization cases and conducted exclusively by examining reimbursement administrative data collected from the e-DAPY database of National Organization for Provision of Healthcare Services (EOPYY) in Greece. The database provided contained all impatient hospitalizations classified for every single KEN-DRG code and for every MDC (aggregated) for the time period January to June 2013 (first semester of 2013). Results: Our results demonstrate that though there is a strong association between reimbursement rates and clinical severity, there are several KEN-DRG codes that are over-(under-) reimbursed, taking in consideration their clinical severity class. Conclusion: Because DRGs systems are crucial in measuring relative efficiency among hospitals, as well as driving ongoing reimbursement, they should incorporate and establish the severity level for every admission, so as to determine whether case mix growth is associated with real costs or with coding and documentation improvements at the hospital.

Minimum-distance requirements could harm high-performing critical-access hospitals and rural communities.

Since the inception of the Medicare Rural Hospital Flexibility Program in 1997, over 1,300 rural hospitals have converted to critical-access hospitals, which entitles them to Medicare cost-based reimbursement instead of reimbursement based on the hospital prospective payment system (PPS). Several changes to eligibility for critical-access status have recently been proposed. Most of the changes focus on mandating that hospitals be located a certain minimum distance from the nearest hospital. Our study found that critical-access hospitals located within fifteen miles of another hospital generally are larger, provide better quality, and are financially stronger compared to critical-access hospitals located farther from another hospital. Returning to the PPS would have considerable negative impacts on critical-access hospitals that are located near another hospital. We conclude that establishing a minimum-distance requirement would generate modest cost savings for Medicare but would likely be disruptive to the communities that depend on these hospitals for their health care.

US hospital payment adjustments for innovative technology lag behind those in Germany, France, and Japan.

Medicare pioneered add-on payments to facilitate the adoption of innovative technologies under its hospital prospective payment system. US policy makers are now experimenting with broader value-based payment initiatives, but these have not been adjusted for innovation. This article examines the structure, processes, and experience with Medicare's hospital new technology add-on payment program since its inception in 2001 and compares it with analogous payment systems in Germany, France, and Japan. Between 2001 and 2015 CMS approved nineteen of fifty-three applications for the new technology add-on payment program. We found that the program resulted in $201.7 million in Medicare payments in fiscal years 2002-13-less than half the level anticipated by Congress and only 34 percent of the amount projected by CMS. The US program approved considerably fewer innovative technologies, compared to analogous technology payment mechanisms in Germany, France and Japan. We conclude that it is important to adjust payments for new medical innovations within prospective and value-based payment systems explicitly as well as implicitly. The most straightforward method to use in adjusting value-based payments is for the insurer to retrospectively adjust spending targets to account for the cost of new technologies. If CMS made such retrospective adjustments, it would not financially penalize hospitals for adopting beneficial innovations.

How much should be paid for specialised treatment?

English health policy has moved towards establishing specialist multi-disciplinary teams to care for patients suffering rare or particularly complex conditions. But the healthcare resource groups (HRGs), which form the basis of the prospective payment system for hospitals, do not explicitly account for specialist treatment. There is a risk, then, that hospitals in which specialist teams are based might be financially disadvantaged if patients requiring specialised care are more expensive to treat than others allocated to the same HRG. To assess this we estimate the additional costs associated with receipt of specialised care. We analyse costs for 12,154,599 patients treated in 163 English hospitals in fiscal year 2008/09 according to the type of specialised care received, if any. We account for the distributional features of patient cost data, and estimate ordinary least squares and generalised linear regression models with random effects to isolate what influence the hospital itself has on costs. We find that, for nineteen types of specialised care, patients do not have higher costs than others allocated to the same HRG. However, costs are higher if a patient has cancer, spinal, neurosciences, cystic fibrosis, children's, rheumatology, colorectal or orthopaedic specialised services. Hospitals might be paid a surcharge for providing these forms of specialised care. We also find substantial variation in the average cost of treatment across the hospital sector, due neither to the provision of specialised care nor to other characteristics of each hospital's patients.

The Redistribution Of Graduate Medical Education Positions In 2005 Failed To Boost Primary Care Or Rural Training

Graduate medical education (GME), the system to train graduates of medical schools in their chosen specialties, costs the government nearly $13 billion annually, yet there is little accountability in the system for addressing critical physician shortages in specific specialties and geographic areas. Medicare provides the bulk of GME funds, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 redistributed nearly 3,000 residency positions among the nation's hospitals, largely in an effort to train more residents in primary care and in rural areas. However, when we analyzed the outcomes of this recent effort, we found that out of 304 hospitals receiving additional positions, only 12 were rural, and they received fewer than 3 percent of all positions redistributed. Although primary care training had net positive growth after redistribution, the relative growth of nonprimary care training was twice as large and diverted would-be primary care physicians to subspecialty training. Thus, the two legislative and regulatory priorities for the redistribution were not met. Future legislation should reevaluate the formulas that determine GME payments and potentially delink them from the hospital prospective payment system. Furthermore, better health care workforce data and analysis are needed to link GME payments to health care workforce needs.

The Lessons Of Medicare’s Prospective Payment System Show That The Bundled Payment Program Faces Challenges

Policy makers have been trying to replace Medicare's fee-for-service payment system for years with approaches that pay one price for an aggregation of services. The intent is to reward providers for offering needed care in the most appropriate and cost-effective manner. Medicare's first payment change designed to accomplish such a change was the hospital prospective payment system, introduced during 1983-84. But because it focused only on hospital care, its impact on total Medicare spending was limited. In 2011 Medicare began a new initiative to expand the "bundled payment" concept to link payments for multiple services that patients receive during an episode of care. The goal of Medicare's current bundled payment initiative is to provide incentives to deliver health care more efficiently while maintaining or improving quality. This article provides a detailed analysis of how Medicare implemented the hospital prospective payment system, how hospitals responded to the new incentives, and lessons learned that are applicable to the bundled payment initiative. The lessons include that any Medicare payment reform needs to continuously respond to the many different components of the health system and that payment reform should be coupled with analogous reforms in private insurance payment, so that providers receive consistent signals to alter their behavior.